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London - UK
retail sales recorded their largest decline in seven years in the first
quarter as consumers felt the pinch from accelerating inflation.

The volume of goods sold in stores and online fell 1.4% from
the previous three months, the most since early 2010, the Office for
National Statistics said on Friday. In March alone, sales dropped 1.8%, far exceeding the 0.5% decline
forecast by economists.

The figures bode ill for an
economy that relies heavily on consumer spending. Growth almost
certainly cooled in the first quarter and is expected to slow further
this year, putting pressure on the Bank of England to keep interest
rates at a record low. Retail sales last declined during a quarter in
2013.

The sales weakness “seems to be a consequence of price increases
across a whole range of sectors,” ONS statistician Kate Davies said.

Consumers also face a period of heightened political uncertainty after Prime Minister
Theresa May this week called a surprise general election in a bid to strengthen her hand in the coming Brexit talks.

Households are being squeezed by rising food and fuel costs, the
result of the
pound’s 14% drop since the June vote to leave the European Union.
The price of retail goods sold in March increased an annual 3.3%, the most since March 2012.

GDP effect

Sales fell across the board on the month, with only department stores
seeing an increase. Clothing and footwear fell 0.9%, sales of
household goods were unchanged and a category that includes everything
from floor coverings to jewelry plunged 7.7%.

The drop over the quarter knocks 0.08 percentage point off growth,
the ONS said. Compared with a year earlier sales growth slowed to 1.7% from 3.7%. The seasonal-adjustment process removes the
effect of the Easter holiday, which fell in March last year but in April
this year.

Retailers were already facing pressure on margins from rising import
costs and a higher minimum wage.
Next, which has warned of a challenging 2017, has fallen 14%
this year, underperforming the FTSE 350 Index as a whole.

An initial estimate of growth in the first quarter will be published
on April 28, with economists predicting a slowdown to as little as 0.4%, the least in a year. Growth has been driven by households
borrowing more and saving a smaller share of their income than ever
before, a situation analysts say is unsustainable.